Pay companies to hire youth, OECD suggests

July 16, 2013

* OECD official endorses subsidised jobs for youths

* Many long-term jobless people risk losing benefits

By Leigh Thomas

PARIS, July 16 (Reuters) - The plight of youth unemployment in developed economies is so severe it has prompted the OECD to call for more government intervention, possibly including paying companies to hire.

It also said on Tuesday that governments should not roll back minimum welfare schemes and should reallocate, where possible, budgets towards programmes designed to get people back in work.

Unveiling its 2013 employment outlook, the Organisation for Economic Cooperation and Development said joblessness was likely to remain high in its 34 developed member states through most of next year.

But speaking to Reuters after the report’s release, the group’s head of employment policy, Stefano Scarpetta, warned particularly of a growing emergency over youth unemployment.

“We are pushing for bold action to stimulate job creation for young people, even unorthodox measures that you don’t necessarily consider in normal times, like some subsidies for hiring at companies,” Scarpetta told Reuters.

There are already about 48 million people out of work across the OECD’s members. It forecast that the unemployment rate would hit 8.0 percent this year before easing only slightly to 7.8 percent next year.

However, the outlook diverged widely with the unemployment rate set to keep rising in Greece to 28.2 percent next year and Spain seeing its jobless rate rise to 27.8 percent in 2014, the highest in the OECD.

With many countries still struggling to recover from the 2008-2009 financial and ensuing economic crisis, the OECD said there were more and more long-term unemployed people who increasingly risked losing their rights to jobless benefits.

Because youths often have little or even no benefits to start with, the situation has become particularly dire for them.

Youth unemployment rates in Greece and Spain are near 60 percent and economists increasingly see the problem as a top risk for the future of Europe along with the weakness of its banks, according to a recent Reuters poll.

EU leaders, who have made the fight against youth unemployment a priority, agreed last month to set aside around 8 billion euros for jobs and training, even as they admitted that the labour market would only sustainably improve once the crisis-hit region returns to growth.

The OECD urged governments to resist resorting to early retirement schemes in hope of reducing youth unemployment, which it said had little benefit but bore heavy costs.

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